MeenaKrishnamsetty

MattDoiron (Insider Monkey)

John Lawrie, a Board member at Juniper Networks
JNPR, -3.77%
bought about 16,700 shares of Juniper's stock on November 29th at an average price of $18 per share, according to a filing with the SEC. The move more than doubled Lawrie's direct holdings in the company.

In the third quarter of 2012, Juniper Networks experienced only a small increase in revenue compared to the same period in 2011. With costs generally higher, the company has seen a large decrease in net income- $17 million in the third quarter as opposed to $84 million in the third quarter of 2011, and the stock is down 21% from a year ago.

The financial community seems confident that Juniper's struggles won’t last. At their current level the stock’s valued at 51 times trailing earnings (so investors expect the company to rebound) but only 16 times analyst consensus for next year (as the sell-side forecasts better performance as well).

Ken Griffin's Citadel Investment Group more than doubled the size of its Juniper holdings during the third quarter too. It now says it owned 5.4 million shares at the end of September Rind more about Griffin's stock picks.

D.E. Shaw, a large hedge fund managed by David Shaw, cut its Juniper stake but still owned 1.8 million shares As a general rule, however, Juniper Networks wasn't particularly popular in the hedge fund community as only one other fund- Diamond Hill Capital, - reported a stock position worth over $15 million.Check out D.E. Shaw's new picks

In contrast, rival networker Cisco was one of the ten most popular tech stocks among hedge funds for the third quarter of 2012, with 59 hedge funds and other notable investors in our database of 13F filings reporting a position. See the full rankings and read our most recent report on Cisco.

Cisco hasn't been as hurt by recent industry developments as Juniper and it sports just a 12 times trailing PE.. With Cisco also expected to improve in 2013, the stock trades at 9 times forward earnings estimates. Its earnings were actually higher in its most recent fiscal quarter (which ended in October) than in the same period last year, so its business has been performing relatively well recently.

In addition, Cisco has a well-deserved reputation as a relentless share repurchaser and also pays a dividend yield of about 3%. It seems like a better buy than Juniper to us.

Alcatel-Lucent's stock price has dropped 31% in the last year, and in its most recent quarter reported a small decline in revenue. Palo Alto has very low earnings per share numbers compared to its stock price, and so the stock will be dependent on very strong earnings growth over the next several years.

We think that we'd avoid both Alcatel and Palo Alto and but Cisco instead.

Riverbed's multiples look similar to Juniper's: the trailing P/E is high, but the company is expected to improve next year and so it trades at only 15 times consensus 2013 earnings. Riverbed can also boast a 28% growth rate in net income last quarter versus a year earlier, driven by both good revenue growth and higher margins.

Riverbed could be a good growth play if it can keep performing well for the next couple quarters, but we still think that we'd stick with Cisco for now.

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